“A growing number of big US technology companies are heeding the call from Wall Street to hand more of their excess cash back to shareholders,” Richard Waters reports for The Financial Times. “But that does not look likely to stop a huge build-up of liquid reserves that has already left the sector with a cash mountain of historic proportions.”

“By the middle of last year, the concentration of wealth in the hands of a few tech winners had left just six companies – Apple, Microsoft, Google, Cisco, Oracle and Qualcomm – with more than a quarter of the $1.5tn held by US non-financial corporations, according to rating agency Moody’s,” Waters reports. “With nearly $150bn in its coffers, Apple alone was sitting on close to 10 per cent of corporate America’s cash.”

“Alongside the strong cash generation has been a habit of hoarding, caused partly by an innate conservatism in a sector where fortunes can reverse quickly. Steve Jobs, who had his own brush with bankruptcy, paid out nothing at all in dividends and buybacks, even though Apple generated $55bn in free cash flow in his final three years at the helm,” Waters reports. “But as the cash mountains have grown, a second factor has assumed even greater significance. Due largely to tax avoidance strategies that have made it possible to book profits in low-tax countries, much of the tech cash is held offshore. Rather than return it to the US to pay dividends or fund buybacks and incurring an extra tax charge, most tech companies have preferred to wait – and lobby in Washington – for a tax holiday.”

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013

14 Comments

Market share shrinkage or not, with the enormous cash pile that Apple has, even if they don’t want to give it directly to shareholders, Apple should absolutely not be struggling to gain little scraps of revenue if they used just a small portion of that money properly. Holding that enormous amount of cash in a 1% interest bank account while shareholders are hung out to dry is simply outrageous. Apple saying they can’t find ANYTHING better to do with that cash has to be a bold-faced lie. Less wealthier companies could easily find ways to make that money grow through side businesses. They do it all the time.

If Apple actually has plans for that cash pile, then say something to investors and shareholders. Give them some hope, at least. It’s aggravating to listen to Wall Street day after day saying how Apple is inferior to Google. Why is a company that has such a huge amount of cash wealth at its disposal scaring off investors? My take is that they see they’re not going to get anything back from Apple because the company has a reputation of hoarding cash instead of using it to grow the company.

Apple doesn’t even have a product roadmap or long-term business goal that I’m aware of. Apple’s future is too muddied for me to see and I’m sure most investors feel the same way.

Considering just how many companies there are in the USA that’s an absolutely staggering statistic. When you think about it Apple is probably richer than all the companies in the poorer 25 states put together.

If the politicians really want to help solve the debt problem and boost the economy with an influx of money then they would. But the reality is their “silent” supporters who line their pockets keep them from doing so.

They know what the correct thing to do is but they do nothing. They want to point their finger and say “Bad Apple” when the reality is they are protecting their own self interests and this doesn’t matter which side of the isle you are on.

A simple flat corporate tax of 25% with no loopholes or deductions makes sense. Unfortunately, though it would significantly lower the base tax rate, it would increase the effective rate, which is among the lowest in the world. Accordingly, most companies are opposed to a simplified lower rate. Apple would be one of the few companies that would benefit.

Couple of random thoughts. 1.) This is almost funny/tragic. 2.) Tax the shareholders a bit more and not the corps at all. 3.) Instead of penalizing companies doing overseas business, put into policies that would attract that money back home. 4.) Do not allow corps the ability to contribute to elections (goes with #2). 5.) 1-4 have been said over and over, I don’t expect anything to happen with any of it.